INDONESIA: BI Looking To Cut Again, Inflation Stable But Need Stronger IDR
Headline inflation moderated 0.2pp to 2.7% y/y as volatile fresh food inflation eased 1.1pp to 5.5% y/y in November. Core held steady at 2.4% y/y, which was slightly more than consensus forecast. Bank Indonesia Governor said today there is room for further easing and that it just depends on timing and the stabilisation in inflation should allow it to cut rates again when it is confident that the rupiah has stabilised.
- USDIDR is down 0.5% to 16,661 since the 19 November BI decision to keep rates unchanged but this has been helped by a weaker US dollar as Fed rate cut expectations have increased. The BIS IDR NEER was flat in November which is a step in the right direction towards FX stability.
- The S&P Global November PMI reported that cost pressures increased in Indonesia due to the weaker IDR and raw materials and were passed on resulting in highest selling inflation in more than 18 months. This is a trend that will be monitored.
- In October a large jump in personal care & others inflation to 11.9% y/y from 9.9% drove the increase in core inflation. The rise was due to higher global gold prices. They were up almost another 6% over November and so it is not surprising that personal care & others picked up further to 12.5% y/y keeping underlying inflation at 2.4%. Other components saw steady rates.
- The drop in fresh food inflation fed into lower price changes for dining out and general food & drinks components.
Indonesia CPI y/y%
Source: MNI - Market News/LSEG
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
